How both domestic politics and great power competition will shape Asean’s fortunes in 2016

Many turbulent events of the past year are symptoms of a world lacking optimism and growth, and facing possible change in the global order. Even as social and economic uncertainties continue, major power competition and contention grow, especially between the US and China.

There is not much that smaller countries can do to directly change these tectonic trends. There is every danger, instead, that countries in Southeast Asia, in particular, will face great pressures amid the increasing push and pull among the great powers.

Yet they are not blank pieces of paper on which a great power can write at will. There are domestic politics that matter, and these will be clearly evident in the year ahead in a number of key countries. Consider Indonesia and Thailand, the region’s two largest economies, and Myanmar, which has emerged as a promising “frontier” market.

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Indonesia must hope the year ahead will be better. While economic growth has remained at 4-plus per cent, it has slowed, and the nation’s macroeconomics remain relatively weak, as reflected in the rupiah. Given the flat-to-poor outlook for the resource sector, moving ahead with infrastructure and industrialisation is key to growth and job creation.

Yet political signals have been less than positive. The popularly elected president, Joko Widodo, has struggled to lead effectively, facing opposition as well as a party of different factions. Worse, increasingly assertive and narrow nationalistic voices are putting off many potential foreign investors.

The fires and haze pollution – and 2015 was one of the worst fire seasons ever – are an emblem of further problems. It is estimated that Indonesia has lost some US$22 billion in economic production and health care, while millions of people have suffered in the provinces, both in Indonesia and in neighbouring countries. As the fires release heavy loads of climate change gases into the atmosphere, negative international attention will also grow unless the issue is effectively addressed in the year ahead.

Thailand, the region’s second-largest economy, also had a poor 2015. The military coup was at first cheered domestically for ending months of stalemate. But, since then, only very limited signs of progress have been seen and the economy has slowed markedly. Production costs have risen as the pressure of external sanctions and criticism have increased, especially from its erstwhile ally the US.